Nomination forms become important to bypass legal issues
Although death is one of those things in life which we do not like to think about, recent determinations by the Pension Funds Adjudicator (PFA), Muvhango Lukhaimane, shows that an open and honest discussion needs to take place in order to avoid legal battles which can be emotionally draining.
The importance of nomination forms and sufficient evidence to prove financial dependence are key factors which need to be up to date and readily available. Because these issues should never be left to the discretion of the administrators of the death benefits, as insufficient evidence will result in a one sided judgement, which could get it into trouble with the PFA who may raise accusations of gross negligence.
Seeking justice
The first case was that of a respondent from Ga-Rankuwa after his father passed away in July 2011. At the time of his death, the deceased had a gross death benefit of R867507 which was to be distributed between his surviving spouse, a step son and three children from a previous relationship.
The administrators of the Retirement Online Provident Fund (who was the first respondent in this case) determined that the benefits would be spread between the surviving spouse, the stepson and one of the children from the previous relationship as the other children were working and were not financially dependent on the deceased.
The deceased did not fill in a nomination form, so the first respondent determined that R694005 would be paid to the wife, R112776 to the stepson and R60725 to the one child from the previous relationship, who became the complainant in this case.
Varying circumstance
The complainant claimed that although no nomination form was filled in, he felt that he was entitled to at least 40% of his father's death benefits and submitted relevant documentation to the first respondent outlining his allowances from his father. The respondent ignored these submissions.
Sanlam Life Insurance, who became the second respondent in this case as administrators of the first respondent, highlighted that a number of circumstances were applied by the first respondent when making its decision. The first was that the deceased and his spouse were living together at the time of his death and that they were financially dependent on each other as they shared all of the household expenses which included bond repayments towards two properties. It was also determined that the deceased was providing financial support to the stepson and the complainant. The complainant was completing his final year of studies and received a monthly allowance of R2 500 to cover his studies and living expenses.
At the time, the first respondent said that it had allocated only 7% of the death benefits to the complainant based on his age, dependency and probability of future income once his studies were complete.
The PFA refuted this saying, "It is not clear which factors were taken into consideration by the board in allocating the funds in the way that it did. The complainant is still studying and submitted that the death benefit awarded to him does not take into account the reasonable maintenance needs given the extent of his dependency on the deceased. The first respondent was wrong in making its decision as it did not take into account all of the complainants relevant factors.”
This highlights the need for the nomination form as a vital component of an estate. If the nomination form was completed in this instance, there would have been no doubt as to where the money should be distributed. Perhaps the first respondent didn't take into account all of the circumstances regarding the case. But it becomes very difficult when you have to adjudicate using a look and feel policy.
Slippery slope
The second case deals with three complainants who were unhappy with the way in which OVK Aftreefonds Number 2 (the first respondent) distributed a death benefit of R1282833.
The deceased did fill in a nomination form in this case and highlighted that his wife needs to get 60% of the benefits while his four sons (three major sons and a minor son) each receive 10% of the benefits.
However, the first respondent over-ruled this. It wanted to award 10% to the minor son, R50000 to each of the three remaining sons, and the balance of the benefit to the deceased's wife. This was apparently owing to a discrepancy on the financial dependency of the other three sons on the deceased. Communication sent to the complainants by the first respondent asked for proof of dependency and further warned the complainants that no communication would result in the minor son receiving 10% and the wife receiving 90% of the funds. The complainants pointed to the nomination form adding that there were no circumstances to prove that the first respondent should deviate from the nomination form.
ABSA Consultants and Actuaries (administrator of the first respondent and therefore the second respondent in this case) conducted an investigation into the decision of the first respondent and also asked the complainants to submit evidence of financial dependency. The complainants failed to do this. Their legal representative was requested to attend a meeting during which the issue was discussed. It was determined during this meeting that only one of the complainants could possibly be a dependant.
However, the PFA disagreed and returned to the nomination form as proof of the complainants rights. "The board has not provided this Tribunal with critical factors it took into account in awarding the greater portion of the death benefit to the surviving spouse. The board has also not explained what led to the change in its original decision. It appears that the board's decision was made without these critical factors. It follows that the board did not conduct a proper investigation regarding the level of dependency, the age of the dependants, the wishes of the deceased, current financial affairs and future earning capacity of the dependants.”
Editor's Thoughts:
In both cases, the PFA advised that the first respondents need to relook the cases taking all external factors into account. However, this highlights the importance of a nomination document and the need to update it as circumstances change. This needs to be highlighted to clients by brokers and advisers. Please comment below, interact with us on Twitter at @fanews_online or email me your thoughts [email protected].
Comments
Some companies, like Liberty in particular, will use Sect. 37C as an excuse to hold on to the funds for as long as possible while they investigate the possibility of objections from self-supporting, middle-aged adult children of a first marriage who would obviously like to get a share if they can at the expense of the second spouse and the new minor children. Actions like these by administrators (and S 37C) can cause delays that impose serious financial hardship on the minors and spouses that really need the benefits urgently and are expecting to get the benefits because the benficiary nomination named them.
Your article seems to suggest that the Nomination form by the deceased would have obviated this kind of problem but it clearly does not. Report Abuse
Some companies, like Liberty in particular, will use Sect. 37C as an excuse to hold on to the funds for as long as possible while they investigate the possibility of objections from self-supporting, middle-aged adult children of a first marriage who would obviously like to get a share if they can at the expense of the second spouse and the new minor children. Actions like these by administrators (and S 37C) can cause delays that impose serious financial hardship on the minors and spouses that really need the benefits urgently and are expecting to get the benefits because the benficiary nomination named them.
Your article seems to suggest that the Nomination form by the deceased would have obviated this kind of problem but it clearly does not. Report Abuse